Key Idea: Topic 2.7 covers three tools governments use to intervene in markets: price controls (ceilings and floors), indirect taxes, and subsidies. Each creates winners, losers, and a deadweight loss.
✅ Core definitions
Price ceilings go BELOW equilibrium. Price floors go ABOVE. If set the wrong way, they have no effect.
📊 Tax incidence and elasticity
⚖️ Evaluation — all three tools
In diagram questions: always shade the deadweight loss triangle, label government revenue (taxes) or government expenditure (subsidies), and show the incidence split.